For the USD, economic data holds the key to overcome the disappointment of below expected data in the first quarter. Though it is hard to see immediate USD upside because US 10 year yields are now near levels seen early April (weakest since March rally high), a gradual turn-around is possible if these levels hold firm. However, the USD is near levels where any further economic data miss will cast doubts on further upside.

News about the PBoC RRR cut has been followed by the news of a regulatory crack down on the China’s stock market; AUDUSD is down after registering gains on the rate cut news. AUD may remain weak ahead of the RBA meeting minutes (released overnight) and Inflation rate to be released on Wednesday. This may contribute to a RBA rate cut at the May meeting.

EUR may see the decline continue after Greece’s talks with its EU creditors stalled, but the primary reason is likely to be portfolio outflows. With negative yields, central banks and investors abroad are unlikely to keep hold of the bonds at these levels. We are already seeing debt outflows more than offsetting Equity inflows. With ECB eyeing to buy double the net issuance this year, we see private investors being priced out of the fixed income market.

GBP has seen a slight rise thanks to Europe’s Greek woes and GBP being a good proxy for EUR than other currencies like NOK, SEK or even CHF (given recent volatility). But upside may remain limited ahead of the UK general election on 07th May, especially with opinion polls continuing to run tight.

Rahul is an FX Strategist for the TraderMade Research team.Follow Rahul on Twitter to see his intra-day updates...Check out the TraderMade Research service...